1. The Guardian Investment Fund has a total investment of $400 million in five stocks:

Stock	Investment	Stocks Beta Coefficient
A	$120 million	0.5
B	$100	2.0
C	$60	4.0
D	$80	1.0
E	$40	3.0

The current risk-free is 1 percent, and the market return is 11%.

1. Calculate the required rate of return on the Guardian Investment Fund.
2. Suppose you are the manager of the fund and receive a proposal to buy a new stock.

The investment needed to take a position in the stock is $50 million; it will have an expected return of 25 percent; and its estimated beta coefficient is 2. Should the new stock be purchased? At what expected rate of return would management be indifferent to purchasing the stock?